Google has announced an agreement with energy management provider Voltus to develop a virtual power plant that will provide up to 1,070 megawatts of electrical capacity, helping support the vast energy needs of AI data centers without building new power generation plants.

The project, among the largest virtual power plant agreements involving a hyperscaler, will operate within the PJM electricity market, which serves 67 million people across 13 states and Washington, D.C. Google has not disclosed the financial terms of the agreement.

Unlike conventional power plants, which generate electricity, virtual power plants coordinate energy usage across thousands of participating businesses and households. By temporarily reducing electricity consumption during periods of peak demand, these distributed networks make more capacity available to the grid.

Google, like other hyperscalers, faces a tough challenge: securing enough electricity to expand AI infrastructure without driving up consumer power bills. Virtual power plants offer a potential solution, but questions remain about whether they can scale quickly enough to support rapid data center buildout.

New Energy Strategies

Google’s agreement builds on an earlier 100-megawatt project with Voltus announced in June. That initial program attracted more participants than its capacity required, so the companies developed a substantially larger deployment.

Voltus currently manages approximately 9,500 megawatts of distributed energy resources nationwide. The San Francisco-based company recently raised $225 million in Series D financing and has set a goal of managing 20 gigawatts by 2030. The company’s technology coordinates electricity consumption among commercial facilities, industrial operations and residential customers. Participants receive payments for making adjustments to their energy usage.

For example, a manufacturing facility can temporarily rely on battery storage rather than grid electricity. Residential customers can schedule electric vehicle charging outside peak demand periods, while commercial buildings can adjust cooling systems automatically. Voltus said its virtual power plant programs performed well during recent PJM grid emergencies, when unusually warm weather and scheduled power plant maintenance strained electricity supplies.

These individual reductions are relatively modest, but their combined capacity can help grid operators avoid shortages. Voltus CEO Dana Guernsey said some participating businesses have earned enough through the program to offset their entire electricity bills.

Potential Cost Savings

A 2024 Department of Energy study estimated that virtual power plants could provide 10% to 20% of peak electricity demand and save consumers approximately $10 billion annually. Another federal estimate placed potential annual savings at roughly $13 billion by 2030. These savings would result mostly from lowering the need for expensive generating facilities built primarily to handle short periods of heavy electricity consumption.

This issue is of crucial importance in the PJM region, where the expansion of data centers has contributed to higher electricity costs. Northern Virginia, a leading data center market, faces robust demand growth.

Google is pursuing other energy technologies, including nuclear power, geothermal generation and long-duration battery storage. But these projects can require years of development, while virtual power plants can use equipment already installed at customer locations.

Despite their potential, virtual power plants face operational and regulatory hurdles. Utilities must be confident that participating customers will reduce consumption when required. Regional market rules and restrictions on electricity meter data can also complicate deployment.

In any case, the need to create energy alternatives is great: high energy use and the resulting increases in local utility bills have been a key driver of resistance to data center development. According to Data Center Watch, local opposition delayed or stopped at least 45 data center projects valued at nearly $68 billion during one recent quarter.